<< Previous   of   Next >>

ADVERTISEMENT

CONTACT SCBJ John Wolcott, Editor jwolcott@scbj.com Dave Clark, Assistant Editor dclark@scbj.com

Family businesses face unique challenges when it’s time for passing ownership to another entity

Family businesses are crucial to our economic structure: they provide financial freedom for many owners and families across the country.



It takes creativity, determination, and commitment to launch an idea into a successful business and achieve this freedom.



But it takes a strong vision for the future to establish a business’s long-term prosperity and ensure the family’s financial independence for years to come.



Owners who translate this vision into a detailed succession plan can help resolve uncertainties about their businesses’ future leadership and address any other challenges that may arise.



The challenges facing family businesses today are quite different from those of nonfamily businesses. Families often want a successor—ideally from within the family—who will not only effectively run the business, but also continue to represent the family’s values and community legacy.



History supports the idea of family succession as well: Horace Greeley, the influential editor of the New York Tribune, once told aspiring young leaders in the early 1800’s that “the best business you can go into you will find on your father’s farm or in his workshop.”



But the path from an entrepreneur’s new idea to a new business, to retirement, and finally to a new generation of leaders has always been a challenging one to travel.



Families have special needs



Unlike publicly held firms who answer only to management and shareholders, a family business must also consider the needs and desires of other family members.



Many of these family members may not own or work in the business, but still have considerable influence on its future. Just like an owner of a nonfamily business, a family business owner must strive to meet the different needs of management and ownership, but also satisfy a third stakeholder: the family members themselves.



Accordingly, creating a board of directors can help some family businesses better identify and articulate a long-term vision for future succession plans.



Succession planning goes far beyond simply choosing the next business leader or owner, however: it also includes identifying those with the skills and capabilities to lead the family business, preparing them to lead, and building trust in their leadership throughout the company.



In addition, senior-generation leaders must prepare themselves for the next chapter in their lives by diversifying their income sources, deciding where they will refocus their energy outside the business, and establishing estate plans that help support future generations.



Have a family discussion



A family conversation is a good first step toward navigating the complex process of succession planning. Inviting all stakeholders to engage in this essential conversation together allows everyone to offer their input about the final plan.



A public document is another useful succession tool: by detailing each aspect of the proposed plan, you can more easily keep progress and communication on track.



The succession process will affect the lives of many people and everyone involved will approach the issue from a unique perspective, so avoiding misunderstandings is important for a successful transition.



Creating and implementing a thorough succession plan will help the future success of the family business.



Shannon Affholter is a Senior Manager with Moss Adams LLP who deals primarily with business and management planning. He can be reached at shannon.affholter@mossadams.com or at 425-259-7227.